Channel Hotels and Properties (U.K.) Ltd v Tamimi

A covenant requiring development works to be carried out and completed as expeditiously as possible may, on its proper construction and contractual context, impose a once-and-for-all obligation. Where a date for completion can be identified, its breach does not recur daily. A landlord which affirms the lease after that breach irrevocably waives its right to forfeit for it.

A landlord may withhold consent to assignment only on grounds connected with the landlord and tenant relationship concerning the leased property. A contractual interest collateral to that relationship is insufficient. A landlord cannot reasonably refuse consent to a mortgagee’s sale, or require the assignee to recreate discharged obligations, where a priorities deed gave the mortgagee a right to sell with that very effect.

The appellant landlord held an overriding lease of roof space intended for penthouse development. The tenant had charged its long lease to First Penthouse Ltd, which, as mortgagee, agreed to sell the lease to Mr Tamimi. The landlord refused consent unless Mr Tamimi undertook obligations in development and introduction agreements.

Lightman J held that the landlord had waived its right to forfeit for failure to complete the works and had unreasonably withheld consent to the assignment. He granted First Penthouse Ltd’s requested declaration and dismissed the landlord’s forfeiture action. The landlord appealed. The issues were whether the development covenant imposed a continuing obligation and whether the refusal of consent was reasonable.

1. Appeal dismissed unanimously. Lord Justice Peter Gibson, with whom Lord Justice Keene and Lord Justice Maurice Kay agreed, upheld Lightman J’s declaration and dismissal of the forfeiture action.

2. The covenant to carry out and complete the works as expeditiously as possible had to be construed with the preliminary agreement. That agreement imposed a time-limited development programme and made completion ascertainable by a particular time. The covenant therefore imposed a once-and-for-all obligation, analogous to the obligation considered in Farimani v Gates [1984] 2 EGLR 66, rather than a continuing repairing covenant. The breach had occurred before the landlord’s affirming acts. Its waiver was irrevocable, and the landlord could not rely on alleged later breaches concerning a sixth penthouse.

3. Applying the principles in Ashworth Frazer v Gloucester City Council [2001] 1 WLR 2180, refusal of consent must rest on a ground connected with the landlord and tenant relationship concerning the lease. Reasonableness remains a fact-sensitive inquiry, and a landlord need not establish that its factual conclusions were correct if a reasonable person could have reached them.

4. The 1999 priorities deed confirmed the mortgagee’s effective first security and its ability to exercise the power of sale. It was fundamentally inconsistent with that deed for the landlord, claiming through parties bound by it, to oppose the assignment because it would defeat rights under collateral development and commission arrangements. Requiring the assignee to assume equivalent obligations would create new rights and derogate from the mortgagee’s agreed rights.

5. The interests of the landlord’s trust beneficiaries in a development sublease and commission were collateral to the landlord and tenant relationship. They did not provide a reasonable ground for withholding consent. The landlord’s refusal was accordingly unreasonable.

• Court of Appeal (Civil Division): appeal dismissed in [2004] EWCA Civ 1072.

• High Court, Chancery Division: Lightman J granted a declaration that consent to the assignment had been unreasonably withheld and dismissed the landlord’s forfeiture action.